The undecamer of poly-L-leucine at the water-hexane interface is studied by molecular dynamics simulations. This represents a simple model relevant to folding and insertion of hydrophobic peptides into membranes. The peptide, initially placed in a random coil conformation on the aqueous side of the system, rapidly translocates toward the hexane phase and undergoes interfacial folding into an alpha-helix in the subsequent 36 ns. Folding is nonsequential and highly dynamic. The initially formed helical segment at the N-terminus of the undecamer becomes transiently broken and, subsequently, reforms before the remainder of the peptide folds from the C-terminus. The formation of intramolecular hydrogen bonds during the folding of the peptide is preceded by a dehydration of the participating polar groups, as they become immersed in hexane. Folding proceeds through a short-lived intermediate, a 3(10)-helix, which rapidly interconverts to an alpha-helix. Both helices contribute to the equilibrium ensemble of folded structures. The helical peptide is largely buried in hexane, yet remains adsorbed at the interface. Its preferred orientation is parallel to the interface, although the perpendicular arrangement with the N-terminus immersed in hexane is only slightly less favorable. In contrast, the reversed orientation is highly unfavorable, because it would require dehydration of C-terminus carbonyl groups that do not participate in intramolecular hydrogen bonding. For the same reason, the transfer of the undecamer from the interface to the bulk hexane is also unfavorable. The results suggest that hydrophobic peptides fold in the interfacial region and, simultaneously, translocate into the nonpolar side of the interface. It is further implied that peptide insertion into the membrane is accomplished by rotating from the parallel to the perpendicular orientation, most likely in such a way that the N-terminus penetrates the bilayer.